A late-session surge in the equity prices saved the market from becoming one of the ugliest weeks in history. At 3pm, news hit the wires that Tim Geitner, the current president for the New York Fed, will be the new Treasury Secretary under the Obama administration. Although Tim Geitner has already been on a short list to succeed Paulson, the announcement is welcomed by Wall Street as one uncertainty has been removed. But despite the powerful 6% rally for the session, the stock market is still down over 8% for the week, extending the total losses during the past three weeks to over 18%. Earlier in the session, the S&P 500 fell below 744, the closing level on Dec 5, 1996, the day then-Federal Reserve Chairman Greenspan first used “irrational exuberance” to criticize the excessive speculation in the financial market. I’m not too sure what he is in his mind now when it takes 12 years for the market to return to the starting point.
Let’s take a look at the three key indicators: 1. VIX: closed at a new record high of 72.67 compared to 80.86 yesterday. Conclusion: improving; 2. The euro/yen cross: closed at 121 compared to 117 yesterday. Conclusion: improving; 3. The TED spread: closed at 215 bps compared to 215 yesterday. Conclusion: holding. In summary, the market remains in “dangerous” zone although the credit market condition has improved significantly during the past few weeks.
All 10 major economic sectors finished the session higher by at least 3%. Energies, and basic materials each posted a gain of more than 10%. The CRB commodity index rebounded 0.5% and was over 50% off compared to its peak four months ago. The US dollar was traded lower against most major currencies while treasuries gave back some of the gains from earlier this week. The three-month US LIBOR rose 1 bps to 216 bps. The VIX index dropped 8 points. The market breath was positive on both NYSE and Nasdaq and the volume was on the heavy side. New lows on NYSE and Nasdaq were exceeding 2500.

All three major indices tumbled for the second session in a row, sending the S&P 500 to a fresh 11-year low. The US stock market, measured by DJ Wilshire 5000, has lost 50% year-to-date. Worldwide, more than $33 trillion or over 52% of market cap, has evaporated since the beginning of 2008. Prices of Treasuries, meanwhile, soared to record levels no matter whether you look at 2-year, 5-year, 10-year or 30-year. At one point in today’s trading, the yield on the 3-month bill actually fell into negative territory. In other words, investors want to pay rather than get paid for storing money in Treasury. Will we get a quick 10% rally? Will we plunge another 10% from here? Anything is possible at this moment.
Let’s take a look at the three key indicators: 1. VIX: closed at a new record high of 80.86 compared to 74.26 yesterday. Conclusion: worsening; 2. The euro/yen cross: closed at 117 compared to 120 yesterday. Conclusion: worsening; 3. The TED spread: closed at 215 bps compared to 211 yesterday. Conclusion: holding. In summary, the market remains in “dangerous” zone although the credit market condition has improved significantly during the past few weeks.
All 10 major economic sectors finished the session lower by at least 2%. Energies, financials and basic materials were underperforming while utilities and consumer cyclical showed relative strength. The CRB commodity index declined 4.2% and was over 50% off compared to its peak four months ago. The US dollar was traded higher against most major currencies (saving for the yen of course) while treasuries rallied as typical flight to quality. The three-month US LIBOR dropped 2 bps to 215 bps. The VIX index jumped 6 point. The market breath was negative on both NYSE and Nasdaq and the volume was heavier compared to the previous two sessions. New lows on NYSE and Nasdaq were exceeding 2900.

All three major indices tumbled on this Wednesday and hit fresh multi-year lows. We are truly in a no-man’s land unless we look back at least 70 years in history. Are we really heading to another Great Depression? I won’t bet too much on that idea for there are so many differences between then and now. But certainly many market participants believed so. From the stock market perspective, the current bear market is the most severe since the one back in 1937 to 1938 – back then the US suffered a mini Great Depression with the unemployment rate surging over 19%. If I were forced to come up with an explanation for the apparent discrepancy between the real economy(still heading towards worse condition but is quite remote from suffering a 10% contraction in GDP) and the stock market performance(already forecasting a deep recession on the scale of at least 10% drop in GDP), deleveraging could be a good candidate. Lured by lofty service fees and commissions, many financial institutions along with hedge funds leveraged up during the good times. On top of that, money was pouring into the so-called fund of funds, many of which also used strategies to increase leverage. Leverage on top of leverage, we are talking about real disasters if the good time is ended. In September and October alone, close to $100 billion flew out of the hedge fund industry. Additional $110 billion left the mutual fund industry during the same period. November data are not available but I won’t be surprised to see an even larger amount fleeing away from the stock market.
Let’s take a look at the three key indicators: 1. VIX: closed at 74.26 compared to 67.64 yesterday. Conclusion: worsening; 2. The euro/yen cross: closed at 120 compared to 122 yesterday. Conclusion: worsening; 3. The TED spread: closed at 211 bps compared to 211 yesterday. Conclusion: holding. In summary, the market remains in “dangerous” zone although the credit market condition has improved significantly during the past few weeks.
All 10 major economic sectors finished the session lower by at least 2%. Financials and basic materials were underperforming while utilities and consumer staple showed relative strength. The CRB commodity index declined 0.7% and was almost 50% off compared to its peak four months ago. The US dollar was traded higher against most major currencies while treasuries rallied as typical flight to quality. The yield on the 30-year bond closed below 4% and that was the lowest since the bond was introduced in 1977. The three-month US LIBOR dropped 5 bps to 217 bps. The VIX index jumped 6 point. The market breath was negative on both NYSE and Nasdaq and the volume was heavier compared to the previous two sessions. New lows on NYSE and Nasdaq were exceeding 1800.

The market continued to trade in an extremely choppy fashion on this Tuesday. It was up 2% at one point then plunging 4% before recovering 4% at close. In the end, all three major indices were in green with the Dow posting the biggest percentage gain or 1.8%. Once again, there is no specific reason behind today’s roller-toaster trading. Emotion-driven trading probably plays an important role these days. Most economic news of the session was more or less in-line with expectation. Wholesale prices in October dropped by the most in more than 60 years while excluding energy and food, the so-called core PPI rose more than expected. Therefore, on balance, the news was neutral. Total net purchases of US financial assets by foreigners, meanwhile, increased $66.2 billion in September from $21 billion the previous month. It was positive as some had worried about declining interests in the US assets from foreign lenders. Finally, the latest National Association of Home Builders housing market index tumbled five points to 9 in November, a record low in its 23 years’ history. Clearly it will take longer than many had hoped for to bring the housing market back to normal condition.
Let’s take a look at the three key indicators: 1. VIX: closed at 67.64 compared to 69.15 yesterday. Conclusion: Better; 2. The euro/yen cross: closed at 122 compared to 122 yesterday. Conclusion: holding; 3. The TED spread: closed at 211 bps compared to 215 yesterday. Conclusion: holding. In summary, the market remains in “dangerous” zone although the credit market condition has improved significantly during the past few weeks.
Most major sectors finished the session in green led by energies and consumer staples. Financials and basic materials were underperforming. The CRB commodity index declined 0.6% and was almost 50% off compared to its peak four months ago. The US dollar was mixed against most major currencies while treasuries were mixed with the yield curve steepened. The three-month US LIBOR dropped 2 bps to 222 bps. The VIX index dropped 1 point. The market breath was neutral on both NYSE and Nasdaq and the volume was heavier compared to the previous two sessions. New lows on NYSE and Nasdaq were exceeding 1200.

The market continued to slump following the G-20 summit over the weekend. As widely expected, little was achieved during the meeting although participating countries did pledge to take serious steps to prevent a deep recession. By close, all three major indices were off by more than 2%, essentially giving up all gains from the huge one-day rally last Thursday. Similar to last Friday, there is no specific reason behind today’s broad decline. Economic news was horrible but they were mostly in-line or even better than what market had anticipated. The second largest home improvement retailer Lowe’s issued a profit warning for the upcoming quarter. But that was not a surprise either as investors actually bid up the stock on the news.  
Let’s take a look at the three key indicators plus the one credit indicator I added several weeks ago: 1. VIX: closed at 69.15 compared to 66.31 yesterday. Conclusion: worsening; 2. The euro/yen cross: closed at 122 compared to 122 yesterday. Conclusion: holding; 3. The TED spread: closed at 215 bps compared to 211 yesterday. Conclusion: holding. 4. The iTraxx basket spread: closed at 574 bps vs. 558 bps in the previous week. Conclusion: worsening. In summary, the market remains in “dangerous” zone although the credit market condition has improved significantly during the past few weeks. We should also point out that VIX has been above 50 for all sessions since October 6th except Nov 4th, when it was closed at 47.73. Back in the 2001 to 2003 bear market, the peak of the VIX was only 45.
All 10 major sectors finished the session in red led by financials and technology. The CRB commodity index declined 1.5% and was almost 50% off compared to its peak four months ago. The US dollar was mixed against most major currencies while treasuries rallied as typical flight to quality. The three-month US LIBOR was unchanged at 224 bps. The VIX index jumped 3 points. The market breath was negative on both NYSE and Nasdaq and the volume was on the light side. New lows on NYSE and Nasdaq were approaching 800.